SINGAPORE (March 4): The credit quality and exposure of Singapore banks to the at-risk sectors of oil and gas, commodities and China are manageable and the situation is far from a banking crisis, says analyst David Lum of Daiwa.

In a Thursday report, Lum says his top pick is DBS (buy, target $14.71) but adds that “all Singapore banks offer good value at their current prices. Risks to our call include a prolonged regional recession or a major tail event, such as a catastrophic crash in the Chinese economy or a large, unforeseen corporate collapse."

Daiwa’s report comes at a time when the Monetary Authority of Singapore was featured in two public announcements recently in relation to the asset quality of Singapore banks at a time when the market was highly sceptical of their earnings prospects.

In one, MAS’s deputy MD Jacqueline Loh reportedly said that the overall asset quality of loans in the banking system as “healthy” and that MAS conducts industry-wide stress tests regularly and that the 2015 exercise indicated that the banking system was resilient to a range of adverse outcomes.

MAS also released on Feb 29 an information paper titled “Thematic review of credit underwriting standards and practices of corporate lending business”. The conclusion of the 9-page report was that after inspecting several banks in Singapore, MAS did not observe any notable weakening of underwriting standards and practices.

“We cannot ascertain the positive role, if any, that these MAS pronouncements had on the recent rally of bank shares. We believe it was probably minimal, at best, as the current rally appears to be a global-equity and financial-sector recovery. Nevertheless, MAS’s views should count for something, in our opinion, as it is putting its reputation on the line as one as the world’s foremost and most respected regulators,” says Lum.